The Real Effects of Antitrust Enforcement on Corporate Decisions: Evidence from the Courts
I investigate the real effects of antitrust policies on corporate acquisitions, investment, and innovation. I use plausibly exogenous variations in judges’ propensity to dismiss antitrust cases as an instrument for endogenous exposure to antitrust enforcement. The evidence indicates that antitrust enforcement imposes behavioral constraints on firms. Specifically, defendant firms that go through antitrust litigation experience a significant decrease in future acquisitions, especially among serial acquirers. The adverse effect is economically large but transitory, disappearing after two years. Defendant firms substitute acquisitions with internal investment, resulting in no change in patent outputs. My findings highlight the importance of vigorous and continuous antitrust enforcement.